Do reward points pay off?

Every bank wants its customers to be generous with their credit card spending. To encourage their card holders to spend big and often enough, banks offer them reward points.

That is, every time you use your credit card to pay for something, a certain number of points get credited to your account.

Once you have accumulated the minimum number of points stipulated by the bank, you can use them for buying items from the rewards catalogue or paying for travel bookings or even redeeming them against your outstanding card balance.

While reward points are enticing, there are a few things to keep in mind. One, different card spends fetch you points at different rates. Two, the redemption options vary across banks and cards and you must spend big to accumulate enough points to get something substantial. Three, there are conditions attached to the use of reward points. For instance, redemption may be allowed only after minimum point accumulation and only up to a specified time period.

Here we take a look at the rewards programmes offered by different banks on some of their credit cards. When it comes to earning points, what matters is the rate at which it happens and for what spends. For instance, HDFC Bank’s Visa Signature credit card can get you two reward points for every ₹150 spent on the card.

The bank’s Platinum Plus credit card can get you two points for every ₹150, for spends up to ₹50,000 per statement cycle and three points for additional spends beyond the ₹50,000 limit.

With SBI’s Platinum card, you can earn two points for every ₹100 spent except for that at fuel stations. In fact, if the amount has been spent on dining, grocery, departmental and international purchases, you will get ten points for every ₹100 spent but you can earn only up to 40,000 such points in a year.

YES Bank’s Prosperity Rewards Plus credit card too lets you earn points on several different spends. For example, you get two points on every ₹100 retail spend (excludes fuel purchases).

On certain other spends such as those made online and internationally, points can be accumulated at a faster rate. You also get 1,250 points on ₹5,000 in retail spends within the first 30 days of card issuance. Likewise, Citibank’s Rewards Domestic credit card gets you ten points for every ₹125 spent at apparel and department stores (subject to a monthly limit of 560 points) and one point for spends at other places. You are also entitled to 1,000 bonus points on your first ₹1,000 spend within 60 days of card issuance.

Once you have collected the minimum required points, you can start redeeming them. What the reward points can be spent on depends on your card type.

For instance, while points earned on HDFC Bank’s Visa Signature credit card can be spent only on items listed in the rewards catalogue, those earned on the bank’s Regalia credit card can also be used for travel, hotel and movie bookings and be converted into air miles to pay for flight tickets.

Likewise, while points earned on Citibank’s Rewards Domestic credit card can be spent on several things, including buying items from the rewards catalogue, those on the Citi Cashback card can be used only for adjustment against outstanding card balance.

But, what’s worth noting most, is the significant difference between the rate at which reward points can be earned and the rate at which they can be redeemed across all banks. So, if you hold HDFC Bank’s Regalia card, ₹150 spent on specified partner merchants will fetch you 20 points. That is, each point is worth ₹7.50. But, at the time of redemption, each point will be considered worth only 60 paise. Likewise, for an SBI Platinum card holder, at the time of earning, each point is worth ₹50 (you get two points for every ₹100 spend), but at the time of redemption, each point is worth only 26 paise. This can be gauged from the fact that you need to have 3,800 points to buy a ₹1,000 Mainland China voucher from the rewards catalogue.

Also, some banks require you to accumulate a certain minimum number of points before you can start redeeming them.

HDFC Bank requires you to have 500 points before you can begin doing so. YES Bank and ICICI Bank, however have no such condition. Most banks also have an expiry date for points. Besides, points earned on different cards of a bank cannot be clubbed together for redemption.

For SBI credit card customers, reward points are valid for two years from the date of accumulation. In case of YES Bank, the validity period is three years. Citibank, however, has no such expiry date.

So, reward points may be attractive but read the fine print before you get carried away.